Can investors trust what they don’t understand?

In this video Tim Haywood, chief executive of Augustus Asset Managers argues that investors should place the same level of trust in fund managers as they do in manufacturers of high performance cars. In essence, do not try to understand what goes on under the bonnet.

In general derivative based funds, using options and futures and other complex financial instruments are difficult to understand for most investors and it is arguable that even the fund managers do not exactly know what levels of risk they are entering into. In addition, many tend to be based in offshore locations and lack proper transparency.